Passage of Resolutions Creates Uncertainty for State-Run Plans

John Scott with Pew Charitable Trusts says there are some complicating factors that do not lend to a straightforward analysis of how this will affect those plans if the resolutions get signed into law.

The U.S. House of Representatives has passed two resolutions introduced last week by lawmakers that would block regulations
issued by the Department of Labor (DOL) regarding the set-up of state-
and municipal-run retirement plans for private-sector employees.

John
Scott, director of retirement savings at Pew Charitable Trusts, who is
based in Washington, D.C., tells PLANSPONSOR the resolutions would still
have to be passed by the U.S. Senate and signed by President Donald
Trump in order for the DOL regulations to be halted. So, as of right
now, it is not affecting states in the process of implementing laws or
the program launched this year by the state of Washington.

Scott
says there are some complicating factors that do not lend to a
straightforward analysis of how this will affect those plans if the
resolutions get signed into law. He notes that the basis for the DOL
final rule dates back to regulations in the 1970s about payroll
deductions for individual retirement accounts (IRAs). Back then, the DOL
said if an employer sets up a payroll deduction for a contribution to
an employee’s IRA, it is not considered an employer plan under the
Employee Retirement Income Security Act (ERISA).

The new rule
clarifies this specifically for those plans that would use automatic
enrollment into the state- or municipal-run plan. “If they take away
this newer guidance, it’s an open question whether these plans can go
forward or not,” Scott says. “Some states have already passed laws and
some have not. There is a lot of uncertainty now, so it’s unsure what
they should do.”

According to Scott, when the DOL issued the
rule, it said it was ultimately for the courts to decide. “A judge will
have to rule on this at some point. That may be the ultimate answer,” he
says.

But, there may be a lot of time before the resolutions go
into effect, if they do at all. Scott says it depends on the Senate
leadership and how fast they want to move it. He notes that the Senate
is on recess next week, so it won’t get to the resolutions until the
following week at the earliest; it could be somewhere between the end of
February and the end of April. He also notes that the Senate has
confirmation hearings to go through and it depends on what bills
lawmakers think are important to tackle. “It’s anybody’s guess what the
timing would be,” he concludes.